50% of residential property purchases are for cash

Discussion in 'Housing and mortgage arrears - policy issues' started by Brendan Burgess, 28 Nov 2018.

  1. Brendan Burgess

    Brendan Burgess Founder

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    upload_2018-11-28_14-8-43.png

    1. According to the Central Bank
    The estimated share of purchases not financed by mortgages has displayed
    signs of a slight decrease in the year to 2018H1 from 55.4 per cent to 49.7
    per cent (Chart 16). When purchases by households are considered, the
    share not financed by a mortgage was 30 per cent in 2018H1, which again
    was lower than the 2017H1 equivalent. While decreasing, cash buyers may
    represent a significant cohort of the Irish residential property market
    participants in the future, as national average residential yields, according to
    Daft.ie data, have remained consistent at 6.1 per cent since mid-2013. Such
    yields remain attractive in a comparative sense, even with the expected
    gradual normalisation of the interest rate environment over the medium
    term.
     
  2. fistophobia

    fistophobia Frequent Poster

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    B,

    Cash buyers could be downsizing, have already sold and are trading up with cash savings.
    The stat., could also be measuring single investor buyers of multi-family properties.
    There's still an unhealthy obsession with property in this country.
    I would buy the smallest property I need, without debt, then invest the rest.
     
    arbitron and cremeegg like this.
  3. Sophrosyne

    Sophrosyne Frequent Poster

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    There was an article about this in the Irish Times in September 2017

    "According to figures compiled by Savills, investors are some of the main drivers of cash sales, accounting for a little more than a third of all cash sales last year. And when you consider purchases by institutional investors such as reits and property funds are excluded, the figure for the entire market is likely to be higher.

    With gross yields of about 6-7 per cent now available on property in Ireland, “logic would tell you” that this will attract investors, McCartney notes.

    And there is plenty of money available for property investment, with Central Bank figures pointing to household deposits of the order of about €100 billion - and rising."

    "If you have €300k-€400k in the bank on deposit, what are you going to do? It’s inevitable that that cash is going to find its way into the market,” says McCartney.

    Keith Lowe, chief executive of estate agents DNG, agrees. “They might have money on deposit at 0.5 per cent that’s effectively losing money with inflation. So rather than keep money on deposit, they go out and buy property for a net return of 6 per cent, once they pay their tax. It starts to make sense at today’s prices.”
     
  4. Andy836

    Andy836 Frequent Poster

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    I'd love to know where someone is getting a net return of 6% on rental properties.
     
  5. Gordon Gekko

    Gordon Gekko Frequent Poster

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    Arguably it makes more sense from a tax perspective to buy as expensive a home as possible given that any uplift is tax-free.
     
  6. RedOnion

    RedOnion Frequent Poster

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    Yes, but only really if you're ever going to sell it and get access to that tax free money?
     
  7. Gordon Gekko

    Gordon Gekko Frequent Poster

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    Downsizing...
     
  8. Sarenco

    Sarenco Frequent Poster

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    Plenty of apartments in Dublin at the moment selling at prices reflecting a gross yield of ~8%.

    I can certainly see how a retiree, for example, with modest taxable income could achieve a yield (ignoring capital appreciation) of 6%, net of costs and taxes.
     
    Sophrosyne likes this.
  9. mtk

    mtk Frequent Poster

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    True but I believe in practice people don't. I think i read about it on askaboutmoney thread a while back...
     
  10. mtk

    mtk Frequent Poster

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    Would the hastle, risk of bad tenants( don't pay and/or wreck the place), rent control zones and the anti landlord legal environment trend not put them off !?
     
  11. Leo

    Leo Moderator

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    That thread was focused on those in Local Authority housing, where there is no incentive, financial or otherwise to downsize.
     
  12. elcato

    elcato Moderator

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    From my experience over the last two years and from talking to colleagues in work, a lot of cash buyers are relatives of people from the far east where there is plenty of cash. I have seen this at viewing up to a few years ago where they dominated the viewer profile.
     
  13. RedOnion

    RedOnion Frequent Poster

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    Not all cash buyers are from far east. I completed a purchase this year as a cash buyer.

    It's also important to remember these are estimates. It's impossible to get exact numbers on this.

    A few years old, but there was an interesting article from CBI on this back in 2016.

    https://www.centralbank.ie/news/art...-in-the-residential-property-sector-2000-2014

    "at the pinnacle of Ireland’s housing boom, there were approximately 150,000 transactions, with cash buyers accounting for 25 per cent of these sales. Since then the volume of transactions fell to a low of 21,000 in 2010 while the share of cash purchases had risen to around 60 per cent in more recent years. The increase in the share of cash buyers reflects the sharp fall in the number of mortgages drawn down while the actual number of cash-buyer transactions is not necessarily atypical of the early years of the last decade. "

    The full bulletin contains examples of what are classed as cash buyers. Interestingly it would include housing charities as there isn't recourse via a mortgage.